COMMERCIAL

BANKS

G H C Prasad Reddy
Kunal Sachdev
Naveen Kumar V
Pinky Baishya
Group-09 Varun Bennur
Vijeta Hattiholi
COMMERCIAL BANK
Commercial banks are the financial institution which acts
as a financial intermediary which collects credit from
lenders in the form of deposits and lends in the form of
loans.

1) Makes loans to individuals
and organizations.

2)Accepts demand deposits
and time deposits.

3)Provides services as
documentary collections,
international banking, trade
financing.
Functions of Commercial Banks
Primary functions.
Secondary functions including agency functions.

Primary functions
• Accepting deposits
• Granting loans and advances:

1. Loans
2. Advances
Secondary functions
 Issuing letters of credit, travellers cheques.

 Undertaking safe custody of valuables, important documents, and securities

by providing safe deposit vaults or lockers;

 Providing customers with facilities of foreign exchange.

 Transferring money from one place to another; and from one branch to another
branch of the bank.

 Collecting and supplying business information.

 Issuing demand drafts and pay orders.

 Providing reports on the credit worthiness of customers.

Difference between Primary and Secondary
Functions

Primary Secondary

Secondary
Main activities of
activities of the
the banks.
banks.

Main source of
income of the They are not the
banks. main sources of
the banks.

These are
obligatory on the These are not
bank to perform. obligatory on the
bank to perform.
Different modes of Acceptance of Deposits
Savings Deposits
Current Deposits
Fixed Deposits
Recurring Deposits
Miscellaneous Deposits
Different methods of Granting Loans by Bank
Cash credit

Bank overdraft,

Loans

Discounting of Bills

Services provided by Modern Commercial Banks

•Agency services
•General utility services
Credit creation
Credit creation is considered to be the main function of
commercial banks these days.

 “Credit creation refers to the power of commercial banks

to expand secondary deposits either through the process of
making loans or through investment in securities”.
Basic concepts used in the process of
credit creation

1. Bank deposits
2. Business Institutions
3. Cash Reserve Ratio
4. Excess Reserves
5. Credit Multiplier
Process of Credit Creation
1. Single Bank System
2. Multiple Bank System
Limitations of credit creation
 Cash Reserve Ratio
 Amount of Primary Deposits
 Banking Habits of the People
 Credit Policy of the Central Bank
 Policy of other banks
 Nature of Securities or Availability of Good
Borrowers
 Commercial and Industrial Condition
The commercial banking structured in India
Schedule banks are
those which are ●
(a) must have paid up capital and reserves of not less than Rs. 5
included in the lakhs.
●
(b) it must also satisfy the RBI that its affairs are not conducted
Second Schedule of in a manner detrimental to the interests of its depositors.
●
Schedule banks are required to maintain a certain amount of
Banking Regulation reserves with the RBI; they in return, enjoy the facility of
financial accommodation.
act 1965; others are
non schedule banks.

Non ●
The difference between schedule
and non schedule is immaterial as
schedule the number of non schedule bank
is almost nil.
Banks
 The following are the Scheduled Banks in
India (Public Sector):
State Bank of IndiaCorporation Bank
State Bank of BikanerDena Bank
State Bank of Hyderabad Indian Overseas Bank
State Bank of Indore Indian Bank
State Bank of Mysore Oriental Bank of Commerce
State Bank of Saurashtra Punjab National Bank
Andhra Bank Punjab and Sind Bank
Allahabad Bank Syndicate Bank
Bank of Baroda Union Bank of India
Bank of India United Bank of India
Bank of Maharashtra UCO Bank
Canara Bank Vijaya Bank
Central Bank of India
The following are the Scheduled Banks in
India (Private Sector):
ING Vysya Bank Ltd
Axis Bank Ltd
Indusind Bank Ltd
ICICI Bank Ltd
South Indian Bank
HDFC Bank Ltd
Centurion Bank Ltd
Bank of Punjab Ltd
IDBI Bank Ltd
The following are the Scheduled Foreign Banks
in India:
American Express Bank Ltd.
ANZ Gridlays Bank Plc.
Bank of America NT & SA
Bank of Tokyo Ltd.
Banquc Nationale de Paris
Barclays Bank Plc
Citi Bank N.C.
Deutsche Bank A.G.
Hongkong and Shanghai Banking Corporation
Standard Chartered Bank.
The Chase Manhattan Bank Ltd.
Dresdner Bank AG.
Sources
http://www.indiastudychannel.com/resources/108889-Credit-Creatio
n-Limitations-Bank.aspx

http://www.slideshare.net/avnishbajpai/commercial-banks

http://www.nabard.org/pdf/report_financial/Chap_IV.pdf

http://www.google.co.in/search?hl=en&rlz=1C1AVSX_enIN399IN399
&tbs=bks:1&q=macroeconomics+credit+creation&btnG=Search&aq=f
&aqi=&aql=&oq=&gs_rfai
=

http://books.google.co.in/books?id=02gh0RAwQYEC&pg=PA303&dq
=macroeconomics+credit+creation&hl=en&ei=gOgmTa7LDZHKrAfb
m5ysDA&sa=X&oi=book_result&ct=result&resnum=4&ved=0CDoQ6